Egypt

Egypt: Steel Industry Overview
(2003-2004)

Domestic demand for steel,
cement and other construction material remained relatively flat, but a weaker
pound and strong regional demand have induced strong export performance and an
overall increase in output and prices. Production and sales of automobiles and
other consumer durables also picked up somewhat, although margins were squeezed.

The European Union (EU) as
a bloc remained Egypt's largest trading partner, accounting for 34% of both its
imports and exports in 2003. Egypt's partnership agreement with the EU, which
came fully into force in June 2004, should result in a significantly larger
volume of trade. The United States is Egypt's next largest trading partner, and
its largest trading partner as a country. It accounted for around 12.7% of
Egypt's exports and 17.6% of its imports in 2003. Asian countries account for
around 12% of exports and 14.5% of imports. Arab countries take 10% of exports
and account for about 7% of imports, while Africa, Russia, and Commonwealth
countries and Australia take up the rear.

Egypt's leading
merchandise export is crude oil and petroleum products ($3.5 billion in 2003),
followed by finished goods (chiefly steel, textiles and apparel), and raw
materials (cotton and other agricultural products). From 2002 to 2003, steel
exports (particularly to the U.S. and EU) grew sharply, from $137 million to
$238 million. Egyptian steel producers looked beyond the weak domestic market,
as their competitiveness was improved by the pound's depreciation, U.S. and EU
restrictions on other steel imports, and a construction boom in the Gulf.
Egypt's steel exports in 2003 to the U.S. were 78,218,869 US$, in 2004 reached
253,344,763 US$, an increase of 224%. Total exports to the U.S. had averaged
$700-900 million in recent years, but jumped to $1.1 billion in 2003.

The construction and
building-materials industries, which led Egypt into recession in late 1999,
performed much better in 2003, driven chiefly by a construction boom in the
Persian Gulf countries.

Steel exports to the Gulf
also increased. Substantially higher prices pushed up the profitability of
Egyptian cement and steel producers, even factoring in the increased cost of raw
materials associated with the pound's depreciation. On the negative side, those
higher prices helped keep domestic demand for building materials flat and led to
accusations that steel producers, particularly the Ezz steel associates that
control the majority of the market, were using their monopoly position to raise
prices. In fact, Egyptian steel rebar prices matched the prevailing world
prices.

Steel rebar production was
3.12 million tons in calendar year 2003 compared to 3.06 million tons in
calendar year 2002. Steel exports to the U.S. decreased slightly from 2002 to
2003, but appear to have increased to other markets. Exports will continue to be
important for Egypt's steel and cement producers over the coming years to fully
exploit the large increases in capacity made in recent years. Fortunately for
Egypt's construction industry, the Gulf's construction boom shows no sign of
abating. If the recovery continues to strengthen, domestic demand should start
to grow again as well, even with the higher prices.